New Geography

Category: Demographics

  • Swedish Lessons for Obama

    During his upcoming visit to Sweden, President Barack Obama will surely praise the nation’s combination of high living standards, few social problems, and high level of income equality. What he may not recognize — although he should — is that the astonishing social and economic outcomes in Sweden and other Nordic countries have more to do with a unique culture among homogenous populations than with simply following a recipe of social democratic policies.

    Sweden long has been admired by US intellectuals, particularly on the left. In 1976 Time Magazine described Sweden as a “country whose very name has become a synonym for a materialist paradise… No slums disfigure their cities, their air and water are largely pollution free… Neither ill‑health, unemployment nor old age pose the terror of financial hardship.” The praise has continued since then. Recently even Bruce Springsteen joined those in favor of the US adopting a Swedish style welfare state. The success of Nordic nations is often seen as the proof that large welfare states lead to good outcomes. Paul Krugman for example writes: “Every time I read someone talking about the ‘collapsing welfare states of Europe’, I have this urge to take that person on a forced walking tour of Stockholm.”

    A walk through Sweden’s history however paints a more nuanced perspective than the one Krugman and other praise-givers might suggest. Around 1870 the previously poor country could begin its route to prosperity, thanks to comprehensive market reforms. Between 1870 and 1936, the start of the social democratic era, the country had the highest growth rate in the industrialised world. Between 1936 and 2008, a period when Sweden was mainly controlled by the Social Democrats, the growth rate was only ranked 18th out of 28 industrialised nations. Also, it is vital to remember that the social democrats were initially highly pragmatic. Small government policies continued until the social democrats radicalized in the late 1960s.

    Sweden’s phenomenal growth can, besides business friendly policies, has much to do with the country’s unique history. Nordic countries were for a long period dominated by independent farmers who had great incentives to work hard in order to survive in the harsh and cold climate. The populations in these homogenous countries not only adapted very strong ethics relating to work and responsibility, but their culture also became characterized by social cohesion and high levels of trust.

    Early welfare state institutions, not least a public school system open for all social classes that emphasized discipline and academic knowledge, indeed promoted social mobility. It is vital to realize that the high level of income equality for which Sweden is envied for developed when the nation had relatively small welfare state. The rise of high tax policies occurred after Sweden had already grown equal.

    The cultural attributes that explain Nordic success work well also in the US, at least amongst the nation’s Nordic population. Today we can see that descendants of Scandinavians who live in the US (whose fore-fathers left well before the development of social democratic policies) have the highest levels of trust in the US. Americans of Swedish origin have the same poverty level as Swedes in their native country. The Americans however earn some 50 percent higher incomes than the latter.

    The period for which Sweden has been most envied by the US left is the massive state expansion that occurred mainly during the period following the second world war, a period when the tax rate increased by almost one percentage point annually over three decades. In particular the left is fascinated by the “third way policies”, a mix between capitalism and socialism, which followed radicalization of previously pragmatic social democrats in the late 1960s. This period, characterized by massive state involvement and effective marginal tax rates of sometimes 100 percent, was however anything but successful. Previously Sweden had thrived due to birth of new entrepreneurial firms, a phenomenon that almost stopped in 1970 and did not again start until significant market reforms where introduced during the 1990s and early 2000s.

    During recent decades the levels of economic liberty have again increased strongly in the Nordic countries (Norway, leaning on its oil-wealth, is somewhat slow to reform). The Nordic nations compensate for their high taxes and regulated labour markets by having introduced high levels of economic liberty in a wide range of other fields. Recently, even the taxes have been reformed. In 2000 total tax revenues in Sweden were over 51 percent of GDP. The level decreased somewhat during the following years of social democratic rule, to 48 percent in 2006. The current centre-right government has reduced them to 44 percent and is currently introducing new reductions of the tax burden.

    Rather than expand their welfare states, Nordic nations are again returning to the free market roots that have served them so well historically. This is perhaps an important lesson for Obama, Springsteen and Krugman, to ponder. There are indeed many smart elements in the Swedish welfare state, and the welfare states of other Nordic countries, that deserve admiration. An example is how public child care has encouraged women’s entry into the labor market. Another is Danish flexicurity that combines public safety nets with a liberal labour market. A third is partial privatization of social security in Sweden. A fourth — often ignored —  is the country’s dedication to fiscal conservatism even under the Social Democrats.

    There are also many areas in which some Nordic nations fail whilst others do significantly better. Norway continues to rely on systems with very generous public benefits, which deteriorate the work ethic. The other nations, which cannot rely on oil wealth, have learned their lesson and work towards strengthening incentives for work and entrepreneurship. Finland has kept a school system that is, thanks to academic discipline and knowledgeable teachers, able to educate well those who do not come from academic or middle-class families. Sadly, Swedish public schools, have, much like their US counterparts, moved towards progressive ideas and deterioration in teacher’s knowledge. The result is an inability to stimulate those who are not intrinsically motivated to learn to do so. Overall the Nordic nations also fail at integrating foreign-born, even those who come with higher education.  

    There is simply much to learn from Nordic nations. They have experimented with everything from implementing Milton Friedman’s idea of vouchers in welfare to implementing gender quotas in corporate boards. But aside from benefitting from the unusually strong norms related to work, trust and cooperation, Nordic societies are no exception to the rules of politics and economics. The same policies that hinder growth in the US (high taxes, lack of infrastructure, failing school policies) limit societal success in Scandinavia, whilst steps to encourage innovation, entrepreneurship, and work are proven to work equally well in both sides of the Atlantic.  

    Dr. Nima Sanandaji is a Swedish author of Kurdish-Iranian origin. He has written numerous books and reports about issues such as entrepreneurship, women’s career opportunities, integration, and welfare. Nima is the author of reports "The Swedish Model Reassessed" for Finnish think-tank Libera and "The surprising ingredients of Swedish success” for the Institute of Economic Affairs. Currently he is working on a book about the unique economic and cultural success of both the Nordic nations and the “new Nordic” countries in the Baltics.

  • Southern California’s Road Back

    If the prospects for the United States remain relatively bright – despite two failed administrations – how about Southern California? Once a region that epitomized our country’s promise, the area still maintains enormous competitive advantages, if it ever gathers the wits to take advantage of them.

    We are going to have to play catch-up. I have been doing regional rankings on such things as jobs, opportunities and family-friendliness for publications such as Forbes and the Daily Beast. In most of the surveys, Los Angeles-Orange County does very poorly, often even worse than much-maligned Riverside and San Bernardino. For example, in a list looking at “aspirational cities” – that is places to move to for better opportunities – L.A.-Orange County ranked dead last, scoring well below average in everything from unemployment to job creation, congestion and housing costs relative to incomes.

    Yet, Southern California possesses unique advantages that include, but don’t end at, our still-formidable climatic and scenic advantages. The region is home to the country’s strongest ethnic economy, a still-potent industrial-technological complex and the largest culture industry in North America, if not the world.

    In identifying these assets, we have to understand what we are not: Silicon Valley-San Francisco, or New York, where a relative cadre of the ultrarich, fueled by tech IPOs or Wall Street can sustain the local economy. Unlike the Bay Area, in particular, our economy must accommodate a much larger proportion of poorly educated people – almost a quarter of our adult population lacks a high school degree. This means our economy has to provide opportunities for a broader range of skills.

    Nor are we a corporate center such as New York, Houston, Dallas or Chicago. We remain fundamentally a hub for small and ethnic businesses, home to a vast cadre of independent craftspeople and skilled workers, many of whom work for themselves. In fact, our region – L.A.-Orange and Riverside-San Bernardino – boasts the highest percentage of self-employed people of any major metropolitan area in the country, well ahead of the Bay Area, New York and Chicago.

    Policy from Washington has not been favorable to this grass-roots economy. The “free money for the rich” policy of the Bernanke Federal Reserve has proven a huge boom to stock-jobbers and venture firms but has not done much to increase capital for small-scale firms. Yet it is to these small firms – dispersed, highly diverse and stubbornly individualistic – that remain our key long-term asset, and they need to become the primary focus on regional policy-makers.

    Ethnic Networks

    Immigration has slowed in recent years but the decades-long surge of migration, largely from Asia and Mexico, has transformed the area into one of the most diverse in the world. More to the point, Southern California has what one can call diversity in depth, that is, huge concentrations of key immigrant populations – Korean, Chinese, Mexican, Salvadoran, Filipino, Israeli, Russian – that are as large or larger than anywhere outside the respective homelands. Foreigners also account for many of our richest people, with five of 11 of L.A.’s wealthiest being born abroad.

    These networks are critical in a place lacking a strong corporate presence. Our international connections come largely as the result of both the ethnic communities as well as our status as the largest port center in North America, which creates a market for everything from assembly of foreign-made parts to trade finance and real estate investment. Southern California may be a bit of a desert when it comes to big money-center banks, but it’s home to scores of ethnic banks, mainly Korean and Chinese, but also those serving Israeli, Armenian and other groups.

    For the immigrants, what appeals about Southern California is that we offer a diverse, and dispersed, array of single-family neighborhoods. Both national and local data finds immigrants increasingly flocking to suburbs. Places like the San Gabriel Valley’s 626 area, Cerritos, Westminster, Garden Grove, Fullerton and, more recently, Irvine, have expanded the region’s geography of ethnic enclaves.

    These enclaves drive whole economies, such as Mexicans in the wholesale produce industry or the development of electronics assembly and other trade-related industry by migrants largely from Taiwan. Global ties are critical here. Korean-Americans started largely in ethnic middleman businesses, but have been moving upscale, as their children acquire education. They, in turn, have helped attract investment from South Korea’s rising global corporations, including a new $200 million headquarters for Hyundai in Fountain Valley, as well as a $1 billion, 73-story new tower being built by Korean Air in downtown Los Angeles.

    Tech Industrial Base

    During the Cold War, Southern California sported one of the largest concentrations of scientists and engineers in the world. The end of the Cold War, at the beginning of the 1990s, severely reduced the region’s technical workforce, a process further accelerated by the movement out of the region of such large aerospace firms as Lockheed and Northrop. The region has roughly 300,000 fewer manufacturing jobs than it had a decade ago, largely due to losses in aerospace as well as in the garment industry.

    Yet, despite the decades-long erosion, Southern California still enjoys the largest engineering workforce – some 70,000 people – in the country. It also graduates the most new engineers, although the vast majority of them appear to leave for greener pastures. One looming problem: a paucity of venture capital, where the region lags behind not just the Bay Area, but also San Diego and New York. This can be seen in the relative dearth of high-profile start-ups, particularly in fields like social media, now dominated by the Bay Area.

    But the process of recovery in Southern California does not require imitating Silicon Valley. Instead we need to leverage our existing talent base – and recent graduates – and focus on the region’s traditional strength in the application of technology. A recent analysis of manufacturing by the economic modeling firm EMSI found strong growth in some very promising sectors, including the manufacturing of surgical and medical equipment, space vehicles and a wide array of food processing, an industry tied closely to the immigrant networks.

    Cultural Complex

    For most Americans, and even more so among foreigners, the image of Southern California is shaped by its cultural exports, not only in film and television but in fashion and design. This third sector epitomizes the uniqueness of the region, and provides an economic allure that can withstand both the generally poor business climate and the incentives offered by other regions.

    After a period of some stagnation, Hollywood again is increasing employment. Roughly 130,000 people work in film-related industries in Los Angeles, which is now headed back to levels last seen a decade earlier but still well below the 146,000 jobs that existed in 1999.

    At the same time, the sportswear and jeans business in Los Angeles, and the surfwear industry in Orange County, remain national leaders. Overall, the area’s fashion industry has retained a skilled production base – over twice that of rival New York’s – and has been aided, in part, by access to Hollywood, lower rents and labor costs than in New York.

    Taken together, these sectors – ethnic business, sophisticated manufacturing and culture – could provide the basis for a renaissance in the local economy. The smaller firms in these fields, in particular, need a friendlier business climate, a more evolved skills-training program from local schools and a better-maintained infrastructure. More than anything, though, they require an understanding on the part of both government and business that their success remains the best means to reverse decades of relative decline.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at The Orange County Register.

  • South Korea, What Will Limit the World’s Global Underdog?

    South Korea is a small country with grit. The shrimp sized peninsula is a national success story that transformed itself from impoverished conditions to industrial riches in a remarkable 68-year postwar period. The country experienced the fastest growth in per-capita GDP since the 1960. According to the World Bank, South Korea’s GDP per capita in 1960 was $155 and has risen to $22,424 today, which is greater than the national wealth of their Chinese neighbors.

    Korea’s rise to world prominence did not come easily. The country rose to its ranks after being destroyed by a half-century of Japanese colonization and from the ashes of the divisive Korean War, which left its cities, including the capital, Seoul, in ruins. At war’s end GDP stood at less than $200 per capita, no natural resources, and a third of the population was homeless.  Today it is home to a number of Fortune Global 500 conglomerates, most notably, Samsung at no. 14, SK Holdings no. 57, POSCO no. 167, and Hyundai no. 206.

    The country also took a tortuous path towards democracy, living under authoritarian and military-dominated regimes until 1945. Now it is not only a thriving, and often contentious democracy, but now boasts its first female president.   

    But the question is: will South Korea’s miraculous rise to power give enough reason to believe that Korea is capable of global influence and expansion? For the most part, the answer – at least for the near future – is yes.

    This trajectory will continue even though the country – known as the “shrimp among the whales” – lives next door not only to its unpredictable northern rival, but also in the same neighborhood as three world powers. Yet in qualitative terms it is increasingly out-performing their rivals and is one of the top tech capitals in the world. This place is literally wired for success: Number one in e-government and top five in the global gaming market, with the fastest and cheapest broadband connection on earth.

    Due to the smallness of the domestic market – the country is home to only 48,955,203 people – Korean businesses need to operate on a global scale. Heavily dependent on international trade, the country, in 2011, ranked as the world’s eighth largest exporter and ninth largest importer. An example of this is Samsung, the world’s largest smartphone maker. This will lead Korean firms to continue to invest heavily on a global basis.   

    Perhaps the most impressive accomplishment can be seen in smart phones, an area that long-time electronics leader – and former colonial overlord – Japan has stumbled in. According to the Wall Street Journal, Strategy Analytics reported Samsung’s smartphone shipments grew to 69.4 million units in the quarter, giving it a market share of 33% – almost twice that of Apple.

    Samsung’s growing cash reserves evidence its strength as a fierce competitor to Apple and questions Apple’s ability to return to its market leadership. Some commentators predict Apple will need to make price reductions or find an unforeseen market that does not compete. But its most recent blow in the American markets came after the ITC ban on the import and sale of some Samsung products into the U.S. This moment can be the saving grace for Apple but Samsung continues to gain market share and, unlike its Silicon Valley competitor, it is highly diversified as one of the world’s most sophisticated maker for processors, memory, and high-resolution screens.

    But these accomplishments have had their downside. The hyper-connectivity has engendered a “digital addiction” among young children. Concerned of this has become so pronounced that Korea’s science and education ministries announced its policy package in June to “wean students off of their dependency” through boot camps.

    Yet for now, the country’s positive trajectory seems assured. This is not just a matter of technology and manufacturing. The Korean entertainment industry  now ranks seventh in the world according to consulting firm PwC and is home to global stars like Psy of “Gangnam Style” and singer, Rain, whose influence in the music industry is unprecedented ranking him the most influential artist in TIME’s 100 list three years in a row. In the world of pop culture Korea tops the list among the Asian country competitors.  

    Besides entertainment, Korea’s global footprint has been growing exponentially.  Korea’s direct foreign investment history in the U.S. increased steadily ever since the onset of South Korea’s financial crisis in 1997.   Korean investment in the U.S. has jumped from $15.7 billion in 2010 to $24.5 billion in 2012. In particular, Korea has been investing heavily in its East Asian neighbors. South Korean companies were the biggest investors in Indonesia with POSCO, the country’s leading steelmaker, topping it off with a $6 billion joint venture deal with Indonesian steelmaker Kraktau Steel.

    Korean corporations also have been establishing new homes in the U.S. over the years. For example, Hyundai Motors has built its U.S. Headquarters in Fountain Valley in Orange County to “secure its long-term future in California,” as stated in its press release. The two-year and 500,000 square feet development has cost $200 million and is located visibly alongside the I-405 freeway. The project symbolizes economic growth in California and projects a positive outlook for the future of Hyundai as a rising automotive leader in the world. Hyundai’s move also makes Samsung’s plans to build its North American headquarters in San Jose no surprise. Another example is SK Planet, a South Korean Internet services giant, that is planning to invest anywhere from $500 million to $1 billion in the U.S. over the next few years.

    South Korea also has been one of the top three Asian countries to participate in the “East looks West” trend in foreign property investments. In hunt for safe and affordable places to invest, South Korean firms and individual investment in U.S. real estate have surged in the past year. South Korea takes the second-lead after Singapore in investing the U.S. market. According to Real Capital Analytics, Singapore invested $1.87 billion, South Korea $1.83 billion, and China $1.52 billion for a combined total of $5.2 billion in commercial real estate in 2013 alone.  South Korea’s Mirae Asset Global Investments recently acquired Chicago’s West Wacker Drive building for $218 million. A group of South Korean investors also bought the Washington Harbour complex at the U.S. capital for $373 million in July.

    Another noteworthy venture is the Korean Air’s plan to develop the tallest hotel skyscraper in the West at the site of the 1950s Wilshire Grand Hotel in downtown Los Angeles. Expected to be completed in 2017, the 73-story hotel is estimated to cost $1 billion. The skyscraper reinforces Korea’s determination to build its image as an aggressive, forward thinking investor.  

    The leaders of the country have typically been supportive of their conglomerates but also recognize the downfalls in investing too much in a single business. South Korea’s Iron Lady, President Park Geun-hye, has promised to address the country’s major issues starting with the “economy’s excessive reliance on a small number of huge conglomerates”.  For instance, Seoul has offered $1 billion to small and mid-sized exporters in order to reach its targeted export growth of 4.1% in 2013. The South Korean government has also garnered free trade agreements in Europe, India, and reportedly help boost the U.S. auto industry.  

    Yet like other Asian countries, Korea faces some large long-term challenges. It lacks the girth of China, or the EU, not to mention the resources and entrepreneurial system for the United States. Perhaps even more serious, the country now suffers among the lowest birthrates in the world. Although this may not yet be a critical problem, lack of production in this area could threaten the country’s long-term economic position.

    Equally important, research has found that couples that do have children are born with health risks due to the extreme dense way of living. Since the 1970s, the population ballooned and the limited land for residential use led to the mass construction of high-rise apartments. The high density and aesthetically displeasing public spaces in the largest cities makes Korea an unattractive place for foreigners to live undermining it as a global country. For example, Seoul, the country’s capital, ranks highest in population density among OECD countries, a problem in terms of future fertility.

    Development in the services industry will also become critical overtime because of the country’s heavy reliance in manufacturing. Korea does not outsource like its competitors, which has largely contributed to its wealth. But in order to be ranked as a premier nation, services will have to become a higher priority, meaning growth in its skilled work force. Korea lacks the managerial, administrative, and professional social capital that give U.S., Japan, U.K., and Germany their world status. According to Global Insight, 30% of the nation’s economy comes from manufacturing where as the U.S. and Japan have only 13% and 20% in manufacturing jobs, respectively, with a majority of their jobs in services.  

    Despite its massive economy derived mainly from conglomerates and the wealthy few, Korea faces challenges in a number of areas: the diversity of its labor pool, new diplomatic strategies, declining demographics, lack of natural energy resources, and environmental sustainability. As they are keys to Korea’s continued success, the country’s long-term prominence falls into question.

    Grace Kim is an undergraduate at Chapman University majoring in Business Administration and Communication Studies who is also the President of the Chapman Real Estate Association and Editor in Chief of Meta-communicate, the Communication department’s undergraduate research journal.

    Photo from Wiki Commons by user tylerdurden1.

  • Rust Belt Chic And The Keys To Reviving The Great Lakes

    Over four decades, the Great Lakes states have been the sad sack of American geography. This perception has been reinforced by Detroit’s bankruptcy filing and the descent of Chicago, the region’s poster child for gentrification, toward insolvency.

    Yet despite these problems, the Great Lakes’ future may be far brighter than many think. But this can only be accomplished by doubling down on the essential DNA of the region: engineering, manufacturing, logistics, a reasonable cost of living and bountiful natural resources. This approach builds off what some local urbanists, notably Jim Russell, have dubbed “rust belt chic.”

    With a population of 58 million, the Lakes region boasts a $2.6 trillion economy equal to that of France and far larger than the West Coast’s. (We define the region geographically as comprising the western ends of New York and Pennsylvania, northeastern Minnesota, and Ohio, Indiana, Illinois, Michigan and Wisconsin.) Despite the growth in auto manufacturing in the South, the Great Lakes region still accounts for the vast majority of jobs in the resurgent industry, now operating at record levels of capacity.

    Since 2007, Michigan, Indiana, Ohio and Wisconsin have ranked among the top five states for growth in industrial jobs, adding a half million new manufacturing jobs since 2009.

    To build on this progress the region needs to focus on its human assets. This starts with by far the nation’s largest concentration of engineers, some 318,000, which stems from the oft unappreciated fact that manufacturing employs the majority of scientists and engineers in the nation. It also accounts for almost 70% of corporate research and development. This includes disciplines such as mechanical engineering, which according to a recent EMSI study, has enjoyed steady job and income growth over the past 20 years.

    Another critical asset is the concentration of skilled trades, the workers most sought after by employers, according to a recent Manpower survey. To keep this advantage, the area needs to focus on educating its workforce — particularly in neglected inner city neighborhoods — with skill training for jobs that actually exist and are expected to grow. This is already occurring in some states, such as Ohio.

    To be sure, traditional manufacturing jobs, particularly for the unskilled and semi-skilled, likely will never come back in large numbers. But the earnings level for skilled workers will remain well above the national average, and may increase even further as shortages develop.

    Some dismiss such blue-collar strengths as a critical weakness. They suggest that area residents might decamp for places like Silicon Valley where they can find livelihoods cutting hair and providing other personal services for the digerati.

    Of course, no sane Great Lakes leader would endorse this approach in public, but many, instead of embracing “rustbelt chic” prefer to recreate a faux version of America’s left coast. This obsession goes back at least a decade, reaching its most risible level during the time of former Michigan Gov. Jennifer Granholm. Her strategy focused on turning its cities — including Detroit — into “cool” burgs.

    This clearly did little to turn around either already beleaguered state or cities; “cool” did not save Detroit from bankruptcy. Indeed cool represents just one variation in a myriad of Rust Belt elixirs, including casinos, convention centers, “and creative class oriented arts districts. Virtually all the strategies being adopted in Detroit have already been applied in Cleveland, including by the same entrepreneur, Quicken Loans Chairman Dan Gilbert, with very little tangible economic benefit.

    Yet despite this history, Detroit — the poster child of public malfeasance — once again is pinning its hopes on luring the “creative class” to Motor City. It starts with the usual stab at subsidizing housing, office and retail around the central core. This is being jump-started by taking Quicken Loans jobs already in the area’s suburbs, meaning little net regional advantage.

    Even more absurd, Michigan taxpayers are being asked to pony up to as much as $440 million for a new stadium in Detroit for the Red Wings hockey team. In contrast to this beneficence, many remaining established, older smaller neighborhood businesses — many of them deeply entrenched in the Rust Belt economy — get stuck with ever higher tax bills and reduced levels of public service.

    To be sure, this approach can succeed in building hipster cordon sanitaire — a miniaturized but utterly derivative urban district — that can be shown to investors and visiting, and usually core-centric, journalists. It also can enrich speculators and those politicians who service them, but represents a marginally effective means of reviving the city, much less the regional, economy.

    Instead of chasing hipsters , Cleveland urban strategist Richey Piiparinen suggests cities such as his rebuild their economies from the ground up, tapping the strong industrial skills, work ethic and resilient culture deeply embedded in the region. Large factories may not return en masse to Cleveland, Detroit or Chicago, but a strong industrial economy and a culture embracing hard work could stir growth in service-related fields as well.

    Geography and location provide other opportunities . The area’s natural resources — the Great Lakes contain one-fifth of the world’s supply of fresh water — constitute a profound competitive advantage against drought stricken economies in the Inland West, the southern Great Plains and parts of the Southeast. Water is an essential element in many industrial processes, including fracking, a serious issue in parts of the Rust Belt. Miles of attractive coastline could be used to lure not only factories, but high-tech businesses, tourists and educated professionals who can choose their location.

    The Great Lakes also are a natural conduit for the $250 billion trade with Canada, with its vast resource-based economy and growing population . Instead of funding better bars, art galleries and sports venues, or hoping to attract tourists and conventioneers to traipse to Cleveland in December, what the region really needs, noted a recent Brookings report, is better infrastructure, such as bridges, ports, freight rail and roads.

    Critical too are the region’s strong engineering schools. Of the nation’s top 10, four — Carnegie Mellon, Purdue, the University of Michigan, and the University of Illinois at Champagne-Urbana — are located in the Rust Belt. The Great Lakes may not be home to the Ivy League, but it remains the nursery of practical applied intelligence.

    Emerging demographic trends could also play a positive role. The millennial generation will soon be approaching the age when they wish to start businesses, get married, have children and buy homes. A good target would be those seeking a single-family home and a reasonable cost of living; both are increasingly difficult to attain in much of the Northeast and coastal California where the cost of housing, even adjusted to income, can be easily two to three times higher.

    Indeed, despite decades of demographic stagnation, the region already boasts higher percentages of people under 15 than the Northwest, the Northeast (including New York) and has about the same percentage of kids as the rapidly growing Southeast. For a new generation, the Great Lakes could emerge as a destination, not a place to avoid.

    This requires the region becoming more attractive to newcomers, whether from abroad or within the country. As urban analyst Aaron Renn suggests, the Great Lakes has to become more culturally open to outsiders and immigrants. Cities such as Cleveland, Chicago, and Detroit were once magnets for immigrants from Europe and people coming from America’s rural hinterlands, notably the south.

    Restoring appeal to outsiders does not mean denying the region’s proud past, and throwing away its historic assets, but instead focusing on its core values. For many reasons — geography, weather, history — the region cannot remake itself into California, the Pacific Northwest or the Northeast Corridor. Instead the Great Lakes can best restore its legacy as an aspirational region by focusing on the very real things that constitute its historic DNA.

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at Forbes.

    Great Lakes map by BigStock.

  • Plan Bay Area: Telling People What to Do

    The San Francisco area’s recently adopted Plan Bay Area may set a new standard for urban planning excess. Plan Bay Area, which covers nearly all of the San Francisco, San Jose, Santa Rosa, Vallejo and Napa metropolitan areas, was recently adopted by the Metropolitan Transportation Commission (MTC) and the Association of Bay Area Governments (ABAG). This article summarizes the difficulties with Plan Bay Area, which are described more fully in my policy report prepared for the Pacific Research Institute (Evaluation of Plan Bay Area).

    Plan Bay Area would produce only modest greenhouse gas emissions reductions, while imposing substantial economic costs and intruding in an unprecedented manner into the lives of residents. The Plan would require more than three quarters of new residences and one third of net additional employment to be located in confined "priority development areas." These measures have been referred to as “pack and stack” by critics. The net effect would be to virtually ban development on the urban fringe, where the organic expansion of cities has occurred since the beginning of time.

    Irrational Planning

    Violating perhaps the most fundamental requirement of a rational plan, Plan Bay Area begins with a situation that no longer exists. Further, it is based on exaggeration, systematic disregard of official federal government projections and overly optimistic planning assumptions.

    Exaggerated Population Projection: The Plan assumes that the Bay Area will grow 55 percent more rapidly between 2010 and 2040 than official California state Department of Finance population projections indicate. These state-produced estimates have tended themselves to be on the high side (Figure 1). The planners scurried about to resolve these differences, but there is no indication that the state will be revising its projections. Plan Bay Area’s population projection would require growth in the Bay Area to increase by more than one-half from the 2000-2010 annual rate. The exaggeration of population growth has its uses: it leads to a higher greenhouse gas emissions projection for 2040, providing a rationale for stronger policy interventions.

    Ignoring Current Greenhouse Gas Emissions Projections: The Plan also ignores the new, more favorable DOE fuel economy projections (Figure 2). These projections were issued in December, well before the publication of the draft plan in April and the adoption of the final plan in July. Indeed, if the new DOE projections had been published the day before, Plan Bay Area should have been placed on hold and revised. In short, Plan Bay Area was out of date when adopted.

    Overly Optimistic Planning Assumptions: The Plan assumes that travel by light vehicle (automobiles, sport utility vehicles and pickups) would be reduced by substantial increases in transit ridership. Plan Bay Area presumes that expanding transit service 27 percent over the next 30 years will lead to a near doubling of transit ridership. This is stupefying, since over the last 30 years, transit ridership remained virtually the same, while service was expanded nearly twice as much as would be planned from 2010 to 2040.

    The plan also assumes that residents forced into the priority development areas will use transit and walking much more, materially reducing their use of light vehicles. This research behind this assumption is skewed toward transit oriented developments located on rail lines with good access to downtown. But nearly nine out of 10 employees in the Bay Area work outside the downtowns of San Francisco and Oakland, and that number is increasing (according to Plan Bay Area).

    Given recent history, it seems wishful thinking to believe that small transit service expansions and downtown oriented transit development can do much to attract drivers from cars. The modest gains greenhouse gas emissions reductions projected in Plan Bay Area are likely exaggerations.

    Plan Bay Area’s “pack and stack” densification is likely to produce even less than the modest substitution of transit and walking for driving (see The Transit-Density Disconnect). Traffic congestion, in this already highly congested area, is likely to be worsened, which could nullify part or all of the greenhouse gas emission reductions expected from reduced vehicle use.

    Correcting Plan Bay Area Forecasts

    Plan Bay Area would only modestly reduce light vehicle travel and greenhouse gas emissions. This is illustrated in Figure 3, which shows that the “pack and stack” strategies that would force most new residents and jobs into priority development areas, Plan Bay Area would reduce greenhouse gas emissions by 2 percent (“Plan Bay Area” line compared to the “Trend” or “doing nothing” line).

    By contrast, correcting the Plan Bay Area 2040 population estimates to reflect the state population projections would reduce greenhouse gas emissions more than eight times as much (17 percent), without the “pack and stack” strategies. A further correction of the Plan Bay Area 2040 estimates to reflect the latest DOE fuel economy projections, would reduce greenhouse gas emissions 22 percent, 11 times as much as the “pack and stack” strategies.

    Heavy Costs for Households and Businesses

    The Plan’s “pack and stack” strategies seem likely to exacerbate the Bay Area’s already high cost of living. Currently, the San Francisco and San Jose metropolitan areas have the worst housing affordability among the nation’s 52 metropolitan areas with more than 1 million residents. San Jose’s median house price relative to its median household income was 7.9 last year, according to the Demographia International Housing Affordability Survey. San Francisco’s median multiple was 7.8. This severely unaffordable housing results from recent decades of urban containment or smart growth policies, which have severely restricted the land on which development can occur. This drives up prices (other things being equal), consistent with economic principle. This has been made worse by house and apartment impact fees imposed on developers that are far above the national average.

    By comparison, in major metropolitan areas that have not implemented strong urban containment policies, the median multiple has typically been 3.0 or less since World War II, including the Bay Area before its adoption (Figure 4). The “pack and stack” strategies would largely limit new development to small parts of the Bay Area, an even more draconian prohibition than the long standing restrictions on urban fringe development. This further rationing of land could be expected to drive land prices even higher, making it even more difficult for households and businesses to live within their means.

    The problem is already acute. The new US Census Bureau housing cost adjusted data shows California to have the highest poverty rate among the states and the District of Columbia (metropolitan area data is not available). An early 2000s Public Policy Institute of California report showed Bay Area poverty to be nearly double the official rate, adjusted for the cost of living. Ultra pricey San Francisco had among the ten highest poverty rates – over twenty percent – of any urban county in the country.

    Unaffordable housing has also fueled an exodus to the San Joaquin Valley (Central Valley). Now more than 15 percent of the workers in the Stockton metropolitan area commute to the Bay Area, which led the Federal Office of Management and Budget adding Stockton to the San Jose-San Francisco combined metropolitan area (combined statistical area). In addition, the greater traffic congestion is likely to lengthen work trip travel times. This is likely to further increase emission while also burdening job creation and economic growth (see Traffic Congestion, Time and Money).

    Ignoring the Economy and Poverty

    Plan Bay Area effectively ignores these costs (despite rhetoric to the contrary), by failing to subject its strategies to a cost per ton metric. According to the United Nation’s Intergovernment Panel on Climate Change (IPCC), sufficient greenhouse gas emissions reductions can be achieved at a cost between a range of $20 to $50 per ton. The previous regional plan (through 2035) included such estimates. Only highway strategies achieved the IPCC range. Transit and land use strategies cost from four to more than 100 times the top of the IPCC range. Even those estimates did not include the prohibitively higher housing costs that result from urban containment policies. The cost metric is crucial, because spending more than necessary to reduce greenhouse gas emissions limits job creation and economic growth, which leads to reduced household affluence and greater poverty. This is the very opposite of the economic objectives of public policy. Virtually all political jurisdictions around the world seek greater prosperity for their residents and less poverty. A legitimate regional plan requires subjecting its strategies to economic metrics.

    Opposition

    There is opposition to Plan Bay Area. A citizen movement worked for rejection and has now filed suit claiming that the Plan violates the California Environmental Quality Act. The suit also alleges that MTC and ABAG used a questionable interpretation of state law and regulation to justify the irrational Plan outcomes.

    Recorded Votes

    Opponents were also successful in obtaining a rare recorded vote at ABAG. The governing board (General Assembly) is composed of selected elected officials from cities and counties who are not elected to their ABAG positions. ABAG adopts virtually all of its actions by consensus, rather by recorded votes, as occurs in many of the nation’s regional planning boards.

    Consensus decision making seem especially odd in California, where inability to obtain sufficient votes in the legislature for the state budget required a constitutional amendment. Neither do city councils and county commissions operate on a consensus basis on controversial issues.

    There is no shortage of controversial issues, at ABAG or other regional planning agencies. A good first reform would be for recorded votes to be the rule, rather than the exception. Consensus decision making may be appropriate for clubs, but it is not for representative bodies in a democracy.

    Impeding the Quality of Life

    Plan Bay Area was outdated when approved and reflects a world that no longer exists. Drafters have insisted on extravagantly expensive and intrusive policies that produce only minimal greenhouse gas reductions, and at great cost, using, among other things, unreasonably bloated population forecasts to bolster their approach. Unless changed, the Plan will likely be more successful in driving up housing prices, limiting options for households, and further congesting traffic than meeting its stated goal of reducing   greenhouse gas emissions.

    Wendell Cox is a Visiting Professor, Conservatoire National des Arts et Metiers, Paris and the author of “War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life.

    Photo: San Francisco (by author)

  • America Hanging in There Better Than Rivals

    To paraphrase the great polemicist Thomas Paine, these are times that try the souls of optimists. The country is shuffling through a very weak recovery, and public opinion remains distinctly negative, with nearly half of Americans saying China has already leapfrogged us and nearly 60 percent convinced the country is headed in the wrong direction. Belief in the political leadership of both parties stands at record lows, not surprisingly, since we are experiencing what may be remembered as the worst period of presidential leadership, under both parties, since the pre-Civil War days of Franklin Pierce and James Buchanan.

    Yet, despite the many challenges facing the United States, this country remains, by far, the best-favored part of the world, and is likely to become more so in the decade ahead. The reasons lie in the fundamentals: natural resources, technological excellence, a budding manufacturing recovery and, most important, healthier demographics. The rest of the world is not likely to cheer us on, since they now have a generally lower opinion of us than in 2009; apparently the "bounce" we got from electing our articulate, handsome, biracial Nobel laureate president is clearly, as Pew suggests, "a thing of the past."

    But as the Romans used to say, don’t let the bastards get you down. After all, it’s not like our competitors are stealing the march on us. Start with Europe. Just a few years ago, writers like Jeremy Rifkin and Steven Hill were telling us that Europe was the "model" for the world. Expand the welfare state, curtail capitalist excess, provide a comfortable partner to the rising nations of the world, and, well, enjoy a long and comfortable early retirement.

    Now, that early retirement is quickly turning into a kind of senility. Not only is Europe continuing to age – particularly along its Southern rim – but the fiscal pressures of ultrahigh unemployment, approaching 30 percent or above, among the young and the costs of maintaining a strong welfare state could create what urban analyst Aaron Renn has labeled "a demographic Lehman Brothers."

    At the same time the near-collapse of the Southern-rim countries threatens the viability of Europe’s banks, including those in Germany. Increasingly, Germany lives largely so the rest of Europe can die more quickly. Like a prototypical science-fiction villain, Germany – with fewer children than it had in 1900 – relies increasingly on the blood taken from the decaying Southern rim countries. By 2025, Germany’s economy will need 6 million additional workers, likely from such countries as Spain, Italy, Greece and Portugal, to keep its economic engine humming, according to government estimates.

    Asian anemia

    What about our prime Asian competitors? Japan has been the sick man of Asia for more than two decades. It’s now desperate enough to unleash Bernanke-like money-printing policies to supply some desperately needed economic Viagra. With a weaker currency, and more money from the Tokyo exchange, there could be a temporary recovery, but Japan’s long term prognosis is not good.

    What Japan really needs is more animal spirits – particularly the kind that produce offspring. By 2050, according to UN estimates, Japan will have 3.7 times as many people at least age 65 than 15 and younger. By then, there will be 10 percent more Japanese over 80 than under 15. Without an unlikely embrace of immigration, Japan is destined to become the nation in wheelchairs.

    China poses a more serious challenge, but the Middle Kingdom appears headed toward what one analyst calls "the end" of its amazing and profound economic miracle. Growth, once projecting Chinese global preeminence, is slowing precipitously. The country now faces a growing rank of competitors from lower-wage countries poised to take market share from the Middle Kingdom.

    China faces growing political instability at the grass-roots level, a mountain of state-issued bad debt and a festering environmental crisis, which threatens long-term food supplies and could create massive health problems. China is rapidly aging. It will have 60 million fewer people under age 15 by 2050, while gaining nearly 190 million people at least 65, approximately the population of Pakistan, the world’s fourth-most populous country.

    The so-called BRICS (Brazil, Russia, India, China and South Africa), once the darlings of the investment banking set, all are facing slowing growth and rising political instability. It doesn’t help that most are either total or partial kleptocracies, dependent on commodity exports or cheap labor. This is not a solid foundation for ascendency as newer emerging nations – Myanmar, Indonesia, Vietnam – ramp up.

    ENERGY SHIFT

    On all these accounts, North America, including our Canadian and Mexican neighbors, looks best-positioned. The first, and, arguably, most important game-changer is the energy revolution that could realign the economic stars for decades to come. The shale oil and natural gas boom, as the Economist recently noted, is as illustrative of America’s future, and genius at reinvention, "as the algorithms being generated in Silicon Valley."

    The energy boom’s best aspect, besides the emergence of relatively cleaner natural gas, is making global tyrants, such as those ruling Saudi Arabia and Russia, nervous about their future place in the world. These worries alone should send a three-word message to our leaders: Go for it.

    But North America is not, like Russia, a one-trick pony. The U.S. remains the world’s leading food producer and exporter, sending out more of such critical commodities as soybeans, corn and wheat than any other country. After decades of decline, the U.S. industrial base is growing again, and, although job growth is likely to be limited, our manufacturing sector is already the most productive in the world. With the advantages of a decent legal order, a huge domestic market and available workforce, the U.S. has remained the largest recipient of foreign investment on the planet, roughly five times that so far accumulated in China.

    Technology can be a fickle industry, but at this point of the game, it’s fair to say the U.S. is winning that race. As potentially dangerous as the tech giants may become over time, the U.S. dominance in everything from software code (Microsoft) and design (Apple), search (Google), e-retailing (Amazon), and social networking (Facebook) is nothing short of astounding. We even lead in the coffee business (Starbucks) that keeps all those nerds typing code late into the night.

    Cultural influence

    Then there’s the matter of culture. For years, Asian, Third World and European cultural warriors have plotted to knock the U.S. off its pre-eminent perch. But the European film industry is a shadow of its once-glorious efflorescence; much the same can be said about the once-splendid Japanese cinema. To be sure, Chinese films, Korean pop stars and Bollywood are rising forces, but U.S. exports more than $14 billion annually in film and television. On a global level, no one can compete with Hollywood as a packager of images and dreams – and Silicon Valley’s control of new distribution technology could further boost this advantage.

    Finally, there’s the matter of demographics. The United States, like its competitors, is aging, but not as quickly as our prime rivals. The birth rate has slowed with the recession, but it’s likely to come back toward replacement levels in the years ahead as millennials enter their thirties en masse, and immigrants continue coming to the country. America should be the only one of the top five economies with a growing workforce over the next few decades.

    So, if things are so good, why do they seem so bad? Sixteen years of lackluster leadership has not helped – a succession of two spendthrift presidents, one a too-happy warrior with a weak sense of the limits of even an imperial power, and the other, a posturing and arrogant academic oddly disconnected from the fundamental grass-roots drive that moves his country’s economy. Yet I prefer to see it in a more positive light: If we can do better than our major competitors under such leadership, how great a country is this?

    Joel Kotkin is executive editor of NewGeography.com and Distinguished Presidential Fellow in Urban Futures at Chapman University, and a member of the editorial board of the Orange County Register. He is author of The City: A Global History and The Next Hundred Million: America in 2050. His most recent study, The Rise of Postfamilialism, has been widely discussed and distributed internationally. He lives in Los Angeles, CA.

    This piece originally appeared at The Orange County Register.

    USA map image by BigStockPhoto.

  • Children and Cities

    Central cities are not likely to regain their former population. However, some of them may have reached an important inflection point—population growth has returned to at least some of the largest (and longest-declining) cities. For example, New York City’s population has increased by more than one million since 1990, after declining by about one million between 1950 and 1980. Over the past decade, nine of the ten largest (and 17 of the 20 largest) cities in the United States have gained population.

    Many observers attribute the population turnaround to changes in the residential attractiveness of the city, although cause and effect are blurry since new residents themselves have instigated many changes to the urban landscape.   Prominent urban researchers have described particular features of urban areas that have attracted households back to the core. These features include new housing in city centers, amenities such as specialized restaurants and night life, restoration of architectural gems, and myriad cultural activities. Such features are enticing increasing numbers of (mostly young) college-educated singles to call city centers home.

    If one goes back in time, studies on urban household location tended to focus on the tradeoff in the cost of commuting from suburban areas and the lower price of land and housing in suburban communities.  Research indicated that about half of the suburbanization in the post-World War II period was driven by higher income that increased the demand for suburban housing relative to city housing.  It is still the case that suburbanization is partly driven by the demand for larger, detached houses that are more prevalent in suburban communities.   

    To be sure, amenities alone do not explain recent trends. Other studies have documented the ability of urban cores to foster jobs and businesses characterized by intense information exchange and creativity, thereby attracting college-educated workers to live in nearby neighborhoods. In a recent study, we show that central cities are an increasingly important work site for the most highly educated workers in all of the metropolitan areas that we examined, even bankrupt Detroit.¹

    Income, education, and human capital are all important elements in city revival. In a recent study, Alan Ehrenhalt calls the return to city living the “great inversion” that reverses trends present in cities since the mid-twentieth century. He hypothesizes that some American metropolitan areas are beginning to resemble nineteenth century European cities, where the more affluent lived in city centers and households of more modest means lived in the suburbs. Some of the reasons that he offers for the heightened attractiveness of many central cities as a place to live are the decline of manufacturing in cities (making them more livable); lower crime rates; growth in the single, never-married population; lower fertility rates; and a bulging cohort of relatively affluent and educated seniors.

    Although many cities still have a disproportionately number of the poor, poverty has become more suburban over the past decade.  For example, the number of poor in suburbs of Chicago about doubled over the past decade.  Thus, although the poverty rate in cities such as Chicago remains much higher, it has declined relative to suburban areas.

    Conspicuously absent from recent discussion is the role and attractiveness of central cities for families with children. In the past, research and observation both indicated that suburbs provided families with cheaper land and housing, as well as safer neighborhoods and higher quality schools.

    In many MSAs, the central city’s share of college-educated adults approaches or exceeds the city’s share of all persons aged 25 and older, with the exception of some older industrial cities, such as Detroit, Milwaukee and Philadelphia (see table). But for educated adults with children, only Seattle and Charlotte buck the trend, or come close to it.                                  

     

    Percent of MSA residents aged 25 years and older living in central cities, 2009

     

     

    All Persons Age 25+

     

     

    All College- Educated

     

    Parents with School-Age Kids

    College-Educated Parents with School-Age Kids

    Baltimore

               17

               14

              17

                6

    Boston

               19

               20

              13

                8

    Charlotte

               31

               38

              28

              33

    Chicago

               30

               30

              27

              16

    Cincinnati

               13

               16

                 9

                7

    Detroit

               22

               12

              24

                9

    Milwaukee

               25

               19

              27

              11

    Minneapolis

               19

               22

              16

              13

    NYC

               49

               46

              47

              36

    Philadelphia

               33

               24

              30

              13

    Pittsburgh

               12

               14

                 8

                8

    Seattle

               24

               33

              14

              21

    St. Louis

               16

               14

              13

                7

    San Francisco

               22

               27

              14

              12

    Washington, D.C.

               14

               16

                 8

                5

    Source: American Community Survey 2009.

                   

    Yet today, central cities undoubtedly have more to offer households with children. Many cities have made significant strides in improving their public safety, or they have simply benefitted from general trends toward lower criminal activity. However, with regard to public education, it is unclear whether most cities have achieved much traction in this regard, though efforts towards these ends are widespread.  In the case of the city of Chicago, more affluent and educated families with school-age children continue to migrate to suburban communities.  This has resulted in a 16.5% decline in the school-age population in the city of Chicago over the past decade.

    Urban school improvement initiatives range from a host of teacher pay-for-performance reforms, to “small schools” reconfiguration, to charter school choice and high-achieving academies.  In some instances, where highly educated parents with children have chosen to live in the city, parents have opted out of the public school system. For example, in Manhattan about 1 in 4 school-age children attend private schools. In the more affluent areas within Manhattan the percentage is much higher — about 1 in 2 children in families that live in either the Upper East Side or Upper West Side.

    As they aim to encourage further population growth in city centers, policy leaders would do well to understand the residential choices being made by affluent and educated households with children and work to provide the amenities and services important to these families. They represent a population segment that may be significant in attracting jobs and building a tax base to provide public services for all city residents.  Otherwise, working parents who must commute from suburb to city may demand higher wages as compensation for the additional time and cost of getting to work, thus having a negative effect on employment and investment in the city.

    The recent influx of young (mostly well-educated) adult singles represents an opportunity for central cities. These urban homesteaders begin with a preference for urban living; policymakers might want to consider ways to keep them in the city as they marry and raise children.

    In a current study, we are exploring the relationship between higher education, income, and the location of families with school-age children within a city-suburban area context for 15 large metropolitan areas in the United States, including Chicago, New York City, Philadelphia, and San Francisco.² In particular, we highlight the effects of various levels of higher education on household location and how education effects vary for different types of households. We compare our results with estimates for married respondents without school-age children and for never-married respondents without school-age children. Thus, we are able to highlight the heterogeneity in the effects of education on household location by household type and city-suburb location.

    A key variable in our study is whether adults have at least a bachelor’s degree. In about half of the metropolitan areas we examine, educational attainment levels of householders are higher in central cities than in suburban areas. In some cases, the differences are relatively large—for example, the share of population with a college degree is 15 percentage points higher in the city of Seattle than in the suburbs. However, the share is 18 percentage points higher in the suburbs of Detroit than in the city.

    But when it comes to college-educated parents, the apparent residential advantage of the city mostly evaporates. In most cases, college-educated parents with school-age children are far less concentrated in central cities relative to all parents with school-age children, with the exceptions of Charlotte, Pittsburgh, and Seattle. For example, 30 percent of college graduates in the Chicago MSA live in the city of Chicago, but only 16 percent of college-educated parents with school-age children live in the city. About half of these parents send their children to private schools.

    On the face of it, the key reason that parents live in central cities is the location of their work. A high percentage of parents who work in central cities also live there. For example, 59 percent of parents with school-age children who work in the city of Chicago also live there. This declines to 43 percent for college-educated parents with school-age kids.

    How do these numbers hold up to closer statistical scrutiny? To put them to the test, we conducted multivariate analyses with respect to individual household location in city versus suburb. We analyzed each of 15 city-suburb MSA pairs separately for the very recent past. Our study data are drawn from the Census Bureau’s American Community Survey for 2009. According to our results, the ongoing migration of educated, mostly young, adults into the city has not carried over into their child-raising years. Our findings are negative for higher education and income effects on living in a central city for families with school-age children for the largest cities within metropolitan areas in our sample, including Chicago, New York City, and Philadelphia. This contrasts with more positive higher education effects on living in cities for married and never-married respondents without school-age children.

    In most of our study MSAs, households with high educational attainment lead the way in living in central cities, but the presence of school-age children negates this effect. Overall, having either a bachelor’s degree or a master’s degree has a negative effect on families with school-age kids living in a city, although there are a few cases where the effect is positive. Having very high levels of educational attainment (a professional degree or a Ph.D.) is negatively associated with living in a city only in a few cases, suggesting that parents with the highest levels of educational attainment tend to have a greater preference for living in cities than other college-educated parents.

    To what extent should cities pursue households with children as a focus of strategic development? Clearly, the benefits of good schools and safe neighborhoods accrue to all population segments, so these are important goals for policy in any case. Social returns to education and safety are high; today’s children are tomorrow’s citizenry and work force. Now that more college-educated households are choosing to live in the city during their pre-child-raising years, city leaders may want to explore ways to entice more of them to remain in the city after they become parents.

    William Sander (Ph.D., Cornell University) is professor of economics at DePaul University in Chicago.  He has also taught at the University of Illinois at Urbana-Champaign and the University of the Philippines.

    William A. Testa (Ph.D., Ohio State University) is Vice President and Director of Regional Programs, Federal Reserve Bank of Chicago.  He has also taught at Tulane University.

    References:
    ¹William Sander and William A. Testa. 2013a. “Education and the Location of Work: A Continued Economic Role for Central Cities.” Annals of Regional Science.
    ²William Sander and William A. Testa. 2013b. “Parents’ Education, School-Age Children, and Household Location in American Cities.” Paper prepared for the European Regional Science Association Congress, Palermo, Italy.

    Crossing the street photo by Bigstock.

  • Mobility for the Poor: Car-Sharing, Car Loans, and the Limits of Public Transit

    Public transit systems intend to enhance local economies by linking people to their occupations. This presents problems for many  low-income families  dependent on transit for commuting. With rising prices at the gas pump, much hope has been placed on an influx of investment into public transit to help low-income households. But does public transit really help the poor? While the effect of transit access on job attainment is murky, several alternatives such as car loans and car-sharing programs have seen real results in closing the income gap. For Christina Hubbert, emancipation from public transit has been a change for the better. NBC News reports:

    A car means Hubbert no longer spends two hours each way to and from work in suburban Atlanta. It means spending more time with her 3-year-old daughter — and no longer having to wake her up at 5 every morning so she can be in the office by 8. It also means saving hundreds of dollars each week in day care late fees she incurred when she couldn’t get to the center before its 6:30 p.m. closing time.

    Research finds that car-ownership is positively correlated with job opportunities while no such relationship exists with access to transit stations. Furthermore, increased transit mobility has been proven to have no effect on employment outcomes for welfare recipients. The notion that newer and nearer public transit creates benefits for all is inaccurate; it only creates opportunities for those who live near the transit stations, and those opportunities are limited. A study by the Brookings Institute finds that, among the ten leading metropolitan areas in the US, less than 10% of jobs in a metropolitan area are within 45 minutes of travel by transit modes. Moreover, 36% of the entry-level jobs are completely inaccessible by public transit. This is not surprising given the fact that suburbia houses two-thirds of all new jobs.

    The mismatch between people and jobs can be reconciled in two ways: car loans and car-sharing services. Basic car-sharing involves several people using the same car or a fleet of cars, as with the ZipCar. The concept has branched out to on-demand car sharing services, such as Lyft, mobile apps which link riders with drivers.

    Car loans on the other hand have been around for a while and offer affordable financing for a car without a required down payment. Ways to Work, one of the largest loan providers in the U.S., includes courses on personal finance and credit counseling. By making vehicle travel more attractive, these two disruptive innovations threaten the expansion of public transit – and its powerful associated lobbies – in three ways:

    1. It’s more cost-efficient and time-efficient.

    To improve the way we move people, transit developments must save both time and money. Sadly, transit lines are notorious for their extraordinary costs and long delays. Data from the 2010 Census reveals that people living in central cities with a higher proportion of transit riders experience longer commutes. And since transit riders have more cumbersome commutes, they are much more likely to be tardy or absent from work.

    The hefty price tag of transit projects also triggers concern. For example, the cost per new passenger of the Washington Metro line to Dulles Airport was estimated at $15,000 annually. That’s about the same as the current poverty threshold for a household of two.

    Car-loan programs on the other hand are largely cost-efficient, producing real fiscal benefits to borrowers, employers, and taxpayers. A survey of 4,771 borrowers and their employers finds that borrowers have greater job security as a result of access to vehicles. With access to credit, borrowers increase their purchasing power by an average of $2,900 each year and save about $250 by avoiding payday loans and checks-for-cash outlets. Employers gain as well through cost savings due to increase retention and reduced absenteeism and tardiness, which amount to $817 and $1130 per borrower respectively. In large part, providing vehicle financing is a smart investment since it reduces the number of low-income families on social welfare – an annual cost savings of $2,900 for each borrower coming off public assistance.

    Given its clear advantages, car sharing is increasing. Recent reports find that shared-use vehicle organizations have been lucrative. Between August 2012 and July 2013, car-sharing ridership grew by 112 percent and the number of vehicles increased by 52 percent. And although car-sharing is not typically used to transport the poor, having on-demand car service makes it so that door-to-door access is more available and affordable. If car-sharing continues to grow at its current rate, it’s reasonable then to assume that these pseudo-taxi services will be eventually be affordable enough so that people would choose to be chauffeured rather than drive their own vehicles.

    2. Vehicle ownership provides greater access to jobs and economic opportunities.

    Instead of being limited to a few areas that are transit-oriented, families with cars have access to more jobs and economic opportunities. Public transit lines are limited in their geographical coverage and take time to make often numerous stops.  Transfers are inefficient and time-consuming, making much of that coverage impractical. Also regular transit riders have limited employment options since they’re only able to consider jobs in the vicinity of transit stops and stations.

    3. Travel by car  is responsive to current travel patterns

    • A common misperception is that low-income people do not have cars. In reality, 86% of the poor have cars, compared to 95% of the entire population. The high percentage of poor families with cars reveals how automobile culture has become fixed into American ideals of economic well-being and prosperity. And contrary to stereotypes, the poor and the rich similarly spend about 94% of their transportation costs on vehicle travel versus public transit, challenging the notion that low-income travel behavior is unlike that of the rest of the population. As such, providing the poor with cars dramatically levels the playing field as they are the ones who would gain the most from increased access to employment destinations and education facilities.

    A strong argument posited by public transit advocates is that as more cars use the road, congestion and pollution will intensify. And to be sure, public transit is more environmentally friendly than motor vehicles. The Amalgamated Transit Union (ATU), the largest union representing transit workers in North America, reports that one full bus eases the road of thirty-five cars, and that existing transit usage cuts national gasoline consumption by 1.4 billion gallons annually. Yet, on average, this result can only   be achieved if buses were always full, which they are not – authorities from the Los Angeles Metro estimate that their buses run at an average of 42% capacity.

    But is it equitable to ask the poor to forgo mobility and economic gain for the environment? Considering that most Americans experience some degree of social mobility via vehicle ownership, it’s far more reasonable to allow  low-income families greater access to opportunity. In addition, new fuel efficiency standards for cars set by the Obama administration will decrease overall GHG emissions substantially; according to forecasts by the Department of Energy, carbon emissions from light-duty vehicles will drop 21% between 2010 and 2040 in spite of a 40% increase in driving. This shows that, even with more cars on the road, environmental goals can be accomplished.

    Although the eligibility requirements are stricter in some areas than others, every state in the U.S. has a program for low-income residents to have access to car loans. Car-sharing is also rapidly expanding, but  marketing now is geared towards millennials on a budget rather than low-income families. Both innovations, however, respond to new demands faced by future workers, who are likely to find employment in dispersed locations and may make more trips per workday since many may have multiple part-time jobs. With more efficient ways of getting people to work, it’s time to challenge the assumption that the expansion of public transit is the best way to meet the needs of America’s hard-pressed working class.

    Jeff Khau graduated from Chapman University with a degree in business entrepreneurship. Currently, he resides in Los Angeles where he is pursuing his dual-masters in urban planning and public policy at the University of Southern California.

    Photo by Romana Klee, #113 zipcar.

  • Here’s a Way to Flood the US Housing Market with One Trillion Dollars

    Members of the millennial generation – born between 1982 and 2003 – carry a student debt burden of close to one trillion dollars. This is the group that includes many just entering the stage in life when people tend to settle down and start families. Even though Millennials are marrying later than previous generations, they would still be the prime market for sales of single family starter homes, if only they could afford them. As interest rates rise along with home  prices, the only way this key consumer segment will be able to afford to buy a house is if the nation, out of its own self-interest, finds a way to relieve Millennials of their crushing student loan obligations.

    Millennials are the first generation in American history that has been asked to self-finance the cost of the education needed for America to be economically successful. Shortly after the ratification of the Constitution, Congress passed legislation setting aside land in the new territories for the establishment of the iconic one room school houses to assure its newest citizens had the skills required to be good farmers and domestic servants. Even as the country was engaged in a devastating Civil War, a state-by-state movement to mandate universal and free primary education for every child swept the nation and became a permanent part of American society. Then, when the Industrial Revolution generated a demand for factory and office workers with a high school education, the nation expanded the concept to make such an education available equally to young men and women without any requirement to pay tuition.      

    The situation has changed, but the need for an educated young generation has not. The difference is that at least two years of post-secondary education has become a must-have ticket for a young generation seeking to make its way in the world. Yet we have suddenly yanked the universal, free education rug out from under them and asked them to pay for it by not only going into debt, but assuming a debt that is not even dischargeable in bankruptcy court.

    The result is a rising tide of student debt that threatens to undermine the economic vitality of the nation. According to the Federal Reserve, student debt rose by a factor of more than eight between 2001 and 2012, twice as fast as home loans and far in excess of the modest increases in other forms of indebtedness during the same time period. A recently released report by the Consumer Financial Protection Bureau indicates that about one in four student loans is now either in default or in programs designed to help borrowers in distress. This analysis looked only at loans made through the direct student loan program totaling about $570 million, not older ones that may have been offered by banks and other private sector lenders. If borrowers are unable to repay their loans in the long run, the federal government and taxpayers will have to absorb the losses. Why, then, not recognize the problem now and bail out the borrowers so that they can put the windfall to good use in an economy desperately needing a new boost in consumer spending?

    The Great Recession seriously disrupted household formation and consumer spending.  According to an analysis by Merrill Lynch, in the decade before the financial markets’ collapse in 2008, one-third of all housing turnovers came from homeowners older than  55, and about one-third of those sales were to buyers under 34. Since then sales of homes have fallen by about two million units, leaving the economy 2.5 million households below normal levels. Millennials represent about 22% of the US population and control $200 billion of direct purchasing power, not counting their influence on their parent’s spending decisions. Over the next five years, a quarter of Millennials will enter their peak spending years, making them the best hope for reviving the housing market.

    Millennials have expressed a strong preference for living in the type of suburban communities in which they grew up, especially when it’s time, as it is for many of them now, to raise a family. Their first home needn’t be “move in ready;” about a third of them say they would prefer a “fixer upper.” And more than 80% of the generation believe they would find a way to pay for the cost of any repairs themselves rather than borrow the money from their parents. A wave of new home buying would not only give a sharp boost to the durable goods industry that depends on new household formation for its growth, but would also provide a ready-made army to fix up some of the country’s declining, inner ring suburban housing stock.

    There are legitimate public policy issues about how to fix the problem of financing American higher education. Some might argue that we should tackle that problem before dealing with student loan debtors. But with the economic recovery still proceeding at too slow a pace for most middle class Americans, an equally good case can be made that the country should deal with student loan debt either first or as part of a comprehensive reform of  financing higher education. The economy could use the boost, as could the morale of America’s largest and most diverse generation.

    Morley Winograd and Michael D. Hais are co-authors of the newly published Millennial Momentum: How a New Generation is Remaking America and Millennial Makeover: MySpace, YouTube, and the Future of American Politics and fellows of NDN and the New Policy Institute.

    New home photo by BigStockPhoto.com.

  • Singapore Seeks Its Home

    August 9th is National Day in Singapore, and it is accompanied by both public and private celebrations. From my family’s flat in the public housing estate of Hougang, we can hear the roar of jet planes over our heads as they make their way to the National Day Parade grounds for a fly-past and appear shortly before our eyes on the television screen. Over the years, National Day has become a festive affair for an extended family gathering that includes cousins, nieces and aunties, and an excuse to cook-up a feast – a hearty steamboat or hotpot dinner (see picture inset) usually reserved for the Chinese New Year.   

    Dinner is punctuated with reminiscences as well as animated conversations with my primary-school-going niece about the National Day revelry at her school, and we all wait in anticipation to catch the venerable former Prime Minister Mr. Lee Kuan Yew make his appearance amongst the VIP spectators. We take note of his state of health and the uniformity o f outfits worn by the entourage of the ruling People’s Action Party (PAP) Ministers and Members of Parliament. When the national anthem is being sung, I watch from the corner of my eyes at my father silently mouthing the words to “Majulah Singapura” and become acutely conscious of our affinity or bonds not just as family but also as Singaporeans.

    natl day Aug-9-2013.pngYet proud of what we have built, many Singaporeans are also concerned with what we may be losing. On the same day of August 9th elsewhere in this island-state of Singapore, a tireless group of activists1 are conducting an evening tour of the old Bukit Brown cemetery in an effort to raise awareness of the “forgotten histories” of those pioneers – coolies, poets, philanthropists, businessmen, bankers, educationists, doctors, diplomats, musicians, builders, architects and war heroes who now lay there but whose stories and contributions to society have not (yet) been told. Their tombs were to be exhumed and the cemetery leveled for the construction of a 6-lane expressway. Working with urgency and energetic vigor, the activists advocate for the preservation of Bukit Brown cemetery as a “living heritage site”.  Put together with other groups such as Nature Society, Transient Workers Count Too (TWC2), Association for Women’s Action and Research (AWARE) etc., the Bukit Brown activists form part of an emerging social and cultural movement in Singapore that reflects the changing character and ethos of its society.

    National Day Parody 2012- Is this home - Singapore (Parody of Kit Chan-u0027s Home-家).mp4The sense of loss is one of the themes that “Cook a Pot of Curry” – a witty, humorous and poignant theatrical production by local playwright Alfian Sa’at, tackles with great nuance.  Staged by theatre group “Wild Rice” in July, 2013, it was sold-out on almost every performance night. The play reflects critically on what it means to be Singaporean. It confronts the recent influx of immigrants, foreign talents and workers that has given rise to a tide of anti-foreigner sentiments blamed for everything from “overcrowding on public transport, escalating property prices and wage depression” (Wild Rice: Alfian in the spot-light). Using a high-profile dispute between a recently arrived immigrant couple from China who had complained to the authorities about their Singaporean Indian neighbors because they could not stand the smell of curry being cooked next door, the play draws attention to the ridiculous “solution” proffered by the mediating authority to the Indian family to cook curry only at stipulated times.  This ruling threw Singaporean society into a frenzied fit of private curry parties as a protest against the government, fuelled the toxic seething anti-foreigner sentiments and inspired a popular Singaporean blogger Mr. Brown to spoof the song “Curry Curry Night”, karaoke style.  The play itself grapples with issues of population, immigration and identity that converge on the question of home. But "Is this home?", asks a character in the play as he sings wistfully to a Youtube parodied national day song.

    cook a pot of curry.pngIn spite of the tension between locals and foreigners, the play manages to convey their shared sense of marginalization and loss, confusion and anxiety.  Through testimonies gathered from a series of interviews with people from all walks of life in Singapore, “Cook a Pot of Curry” showcases these individual voices that include excerpts from “Remalyn”, a 30-year-old Filipina domestic helper; “Ravi”, a 40-year-old Singaporean social worker; “Evelyn”, a 28-year-old Singaporean Yoga instructor; “Xiaoqing”, a 23-year-old post-graduate student from China, and “Syamsul”, a 33-year-old Singaporean civil servant into the script.  These voices represent the diversity of views that range from “new citizens who support the ruling party, foreigners who don’t really like Singapore, citizens who hate foreigners”, says Nelson Chia who plays the role of the post-graduate student from China as well as a Singaporean labor activist (See “Art imitates Life” 15-July-2013: Interview with Nelson Chia).

    The play is   not afraid to confront “sensitive issues of race and nationality” – issues rendered taboo by the government of former Prime Minister Mr. Lee Kuan Yew, which sought to defuse the country’s turbulent race relations and religious tensions in the past. The PAP-government’s tight grip on those “out-of-bound” markers have for a long period of time defined for Singaporeans their identity and its meanings that are affixed in a specific time, space and purpose. But these are being unloosened by groups like the Bukit Brown activists who work tirelessly – tombstone by tombstone – to unravel nuggets of stories and memories that may one day present an alternative narrative of, and a trajectory for Singapore.

    Although maybe not as quickly as some might hope, things are changing gradually: in the National Day message of 2013, the Prime Minister of Singapore Mr. Lee Hsien Loong centered his 10-minute speech on the notion of “home”. Speaking from a National Servicemen clubhouse in the public housing estate of Toa Payoh, Mr. Lee took stock of the progress made during the past year: more public housing and stabilized prices in the red-hot housing market; more buses, bus routes and new MRT train lines. Addressing national issues such as the population, economy and the changing global conditions, he spoke to ordinary Singaporeans about our concerns: crowding and congestion, job security, cost of living, the Singaporean identity and whether our children will do better than ourselves.

    However, the work of making a home out of Singapore goes beyond building brick-and-mortar houses. In its own way, “Cook a Pot of Curry” attests to the complexity of making a home out of Singapore: it presents the diversity of views and complicated emotions that do not suggest any clear-cut or straightforward “solution” towards resolving the tensions and conundrums which have arisen, and engenders questions not easily nor readily answered as Nelson Chia puts it:

    “It is quite poignant for me. I am a Singaporean but I have relatives that are Permanent Residents (PR) and friends who are foreigners. Rationally, I can understand the policies… but complexities come because a lot of us are not prepared for the changes. For example, rationally, you know if you lose a job to a foreigner, it is not their fault. But somehow, people take it personally…This play raises a number of questions for me as well.” (“Art imitates Life” 15-July-2013: Interview with Nelson Chia).

    “Joanne” – a dour-faced teacher from the play who derides the effort to create a national costume for Miss Singapore Universe showcasing “Singaporean-ness” in all its farcical superficiality, reflects the futility of such socio-cultural projects. Likewise, we may rationalize how social, political and cultural forces have come to shape the meanings of “home” but through “Cook a Pot of Curry”, we realize that it is our longing for inclusiveness, recognition, acceptance and affinity which makes home a possibility. However, when people like Alfian Sa’at continues to be derided and his discourse policed by Singapore’s mainstream media, it is no wonder that many of us – locals and foreigners alike, struggle to call Singapore – home.

    Arthur Chia is a Singaporean Post-doctoral Fellow in the Singapore University of Technology and Design (SUTD) – MIT joint program. He is a student of Southeast Asian studies; anthropology and Science, Technology and Society (STS) studies.

    1 Inset picture shows activists and participants singing “Majulah Singapura” at Bukit Brown on National Day August 9th 2013: Bukit Brownies singing "Majulah Singapura".